SB 625 (Caballero and Limón) — Assembly Committee on Jobs, Economic Development, and the Economy (June 21, 2022)
Summary
This is an Assembly Committee on Jobs, Economic Development, and the Economy analysis of SB 625 (Caballero and Limón), as amended May 28, 2021, for a hearing on June 21, 2022 before Chair Sabrina Cervantes. The Senate vote is listed as 39-0. The bill establishes the California Investment and Innovation Program, administered through the Infrastructure and Economic Development Bank (IBank), to make grants to community development financial institutions (CDFIs). The analysis says the 2022-23 budget bill, SB 154, includes $50 million for the program, contingent on legislation being enacted. Grants may not exceed $25 million in total in any calendar year. The California Coalition for Community Investment is listed as sponsor, and Lendistry is among the registered supporters, with no opposition on file.
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SB 625
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Date of Hearing: June 21, 2022
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Sabrina Cervantes, Chair
SB 625 (Caballero and Limón) – As Amended May 28, 2021
SENATE VOTE: 39-0
SUBJECT: Community development financial institutions: grant program
POLICY FRAME: Responding to the coronavirus pandemic has required the state to take extreme and
rapid steps to protect the health and safety of Californians. Within one week in March 2020, the state
went from open-for-business to implementing a strict stay-at-home order for everyone not directly
engaged in what the government considered an
essential and critical business activity. Since March What is a CDFI?
2020, 27.3 million unemployment insurance claims
have been filed with the state’s Employment All CDFIs have as a primary mission the serving low-
income individuals and communities. How CDFIs
Development Department, claims for initial and accomplish their mission depends on the structure of
extended benefits included. the organization, which includes all the following:
Banks—For-profit corporations providing capital
Even before the coronavirus emergency, however, to rebuild economically distressed communities
when California enjoyed 120 straight months of through targeted lending and investments
financial growth, there were significant economic
Credit Unions—Member-owned non-profit
forces driving income inequality. Between 1979 and cooperatives promoting savings, affordable loans,
2017, earnings for the top 0.1% of households and other financial services
increased by 343.2%, as compared to the earnings of Loan Funds—Typically non-profit organizations
the bottom 90% of households, which experienced an providing financing and technical assistance to
increase of only 22.2%. Given these divergent small businesses, microenterprises, affordable
income outcomes, it is not a surprise that California housing developers, and community service
ranks within the top tier of states relative to household organizations
poverty. Venture Capital Funds—Organizations providing
equity and debt-with-equity services to businesses
California’s recovery from the economic in distressed communities
consequences of the pandemic have surpassed those In accordance with their mission, certified CDFIs also
of every state in the US, with California almost provide educational services like business planning,
consistently gaining 20% to 25% of all new jobs. credit counseling, and homebuyer classes to help their
Economic recovery, however has been very unequal borrowers use credit effectively
and many areas of the state and groups of individuals
remain impacted. Focusing on re-investment strategies that has shown to also address historic economic
disparities should be a top priority. If the state does not, the economic inequality of pre-pandemic
California will expand and drag down the overall recovery.
SB 625 proposes the establishment of a program to provide an ongoing source of revenues to community
development financial institutions (CDFIs), which are community-based organizations that are certified
by the US Treasury to meet the needs of individuals, businesses, and communities who are underserved
by traditional financial institutions.
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The Authors have secured conditional funding for the new program in SB 154 (Skinner), the 2022-23
budget bill, which was approved by the Legislature on June 13, 2022, includes $50 million for the CII
Program, contingent on legislation being enacted to establish the program within the 2022–23 fiscal year.
The policy committee analysis includes information on the federal CDFI Fund, growing income
inequality in California, and issues related to the transfer of the program to a new government entity.
There is no known opposition to this bill. Suggested amendments are included in Comment 8.
SUMMARY: SB 625 establishes the California Investment and Innovation Program (CII Program),
administered through the Infrastructure and Economic Development Bank (IBank), for the purpose of
making grants to CDFIs. Specifically, this bill:
1) Makes findings and declarations:
a) CDFIs are a critical partner in addressing California’s short-term and long-term needs of low- and
moderate-income communities in the areas of affordable housing, health care, small business
lending, economic development, and more.
b) As mission-driven lenders, grantors, and providers of technical assistance, CDFIs have proven
time and again that they can play a valuable role in helping to deploy and leverage public
investment quickly and efficiently.
c) It is the intent of the Legislature in creating the California Investment and Innovation Program to
establish a program that creates an ongoing partnership with CDFIs to assist the State of California
in efficiently deploying resources to communities in need and establishing an equitable economic
recovery that benefits low-income communities and communities of color that have been
disproportionately impacted by the economic fallout of the COVID-19 pandemic and by historical
and ongoing disinvestment.
d) In addition to providing an economic jumpstart for those communities through immediate
investment, it is the intent of the Legislature that the program created by this legislation will serve
as a potential repository for current and future emergency or stimulus funding streams that would
otherwise require the state to start up new programs, thereby slowing the delivery of these funds to
those most in need. The program will be a permanent resource for community investment.
2) Establishes the CII Program, under the authority of the IBank, for the purpose of providing grants to
eligible recipients.
3) Establishes the California Investment and Innovation Fund (CII Fund) in the State Treasury.
a) Upon appropriation by the Legislature, the IBank is required to allocate moneys in the fund to
eligible recipients, as specified.
b) The CII Fund is authorized to receive any funds made available by the state, including, but not
limited to, the federal government, philanthropic entities, entities, and financial intuitions.
4) Requires the IBank, unless otherwise prohibited by law, to use the available funding to do all of the
following:
a) Develop a competitive application process for awarding CII program grants.
b) Require each eligible recipient to submit an application in the form and manner prescribed by the
IBank.
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c) Set aside at least 20% of any amount made available for purposes of the CII Program for eligible
recipients that are small and emerging CDFIs, as defined.
d) Ensure that eligible recipients receiving grants pursuant to the program serve geographically
diverse areas across this state.
5) Authorizes the Director of the IBank to establish an advisory committee for the purpose of reviewing
and making recommendations on CII grant applications and providing recommendations to the IBank
on the successful implementation of the program. If an advisory committee is formed, the bill
requires the committee to consist of the IBank Director (or their designee) and one volunteer from
each of the following groups:
a) A member of the public appointed by the Senate Committee on Rules.
b) A member of the public appointed by the Speaker of the Assembly.
c) A representative of a consumer advocacy group.
d) A member of the public with expertise in affordable housing development or finance.
e) A member of the public with expertise in community development.
f) A representative of a financial institution or a CDFI.
g) A member of the public with expertise in small business lending.
h) A representative of an organization representing the interests of low-income rural communities.
6) Requires grants to be made available in one or more funding rounds, not to exceed $25 million in total
grants in any calendar year.
7) Requires the IBank to determine the maximum amount an eligible recipient may receive per calendar
year. Notwithstanding this authority, no applicant may receive more than 5% of the total grant funds
available in that calendar year.
8) Requires CII grants to be prioritized, to the extent permissible under state and federal equal protection
laws, in accordance with the following criteria:
a) Providing access to capital for communities and businesses that have historically lacked access to
capital, including, but not limited to, the following:
i) Businesses in which a majority of funded business is owned by women, minorities, persons of
color, or veterans.
ii) Businesses in rural communities.
iii) Businesses in low-income communities.
b) Serving communities that are disadvantaged or have a disproportionately high rate of poverty or
unemployment, low educational attainment, or other disadvantaging factors that limits access to
capital and other resources.
c) Providing access to housing, health care, or education or financial services for households that are
very low income, as defined.
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9) Authorizes a CII grant recipient, unless otherwise prohibited by law, to use CII funds for the
following purposes:
a) Providing loans, grants, equity investments, or technical assistance within low-income
communities or for purposes that have a direct and substantial benefit to lower income households.
b) Serving investment areas or targeted populations, as defined, by developing or supporting any of
the following:
i) Commercial facilities that promote revitalization, community stability, or job creation or
retention.
ii) Businesses that either provide jobs in low-income communities or enhance the availability of
products and services to lower income households.
iii) Community facilities.
iv) The provision of basic financial services.
v) Housing that is principally affordable to lower income households. Assistance used to
facilitate homeownership pursuant to this subparagraph shall be limited to services and lending
products that serve lower income households that are either not provided by other lenders in
the area or complement the services and lending products provided by other lenders that serve
the investment area or target population.
vi) Any other businesses or activities deemed appropriate by the bank and consistent with the
purposes of the program.
10) Requires an eligible recipient that provides loans with grant funds awarded under the CII Program to
provide those loans on a revolving basis.
11) Authorizes the IBank to adopt guidelines for the operation of the program, as specified.
12) Requires the IBank to establish time periods for performance and periodic reporting by grantees,
including guidelines that address the following:
a) Periodic financial and project reporting, record retention, and audit requirements for the duration
of the grant to the grantee to ensure compliance with the limitations and requirements, as
specified.
b) Documentation on the use of funds, the number of persons or households served, the geographic
distribution of funds, and other data as determined by the bank to assist the bank in assessing
program outcomes.
13) Defines the following terms:
a) “Community development financial institution” means any CDFI certified by the federal
Community Development Financial Institutions Fund under Part 1805 (commencing with Section
1805.100) of Chapter XVIII of Title 12 of the Code of Federal Regulations.
b) “Disadvantaged community” means an area, as defined by the IBank, as specified, in which the
median household income is less than 80% of the statewide annual median household income
level.
c) “Eligible recipient” means a CDFI for which either of the following applies:
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i) The CDFI has its headquarters in this state.
ii) The CDFI has a record of lending in this state based on either of the following:
(1) At least 25% of the CDFI’s loan portfolio provides financial assistance to persons or
projects located in this state.
(2) The CDFI has provided financing assistance in this state totaling at least $5 million over
the following time periods:
(a) If the CDFI is not a small and emerging community development financial institution,
the three years preceding the date of its grant application.
(b) If the CDFI is a small and emerging CDFI, any time period.
d) “Small and emerging community development financial institution” means a CDFI with less than
ten million dollars ($10,000,000) in assets.
EXISTING LAW:
1) Establishes the IBank within the Governor's Office of Business and Economic Development (GO-Biz)
and authorizes it to undertake a variety of infrastructure related financial activities including, but not
limited to, the administration of the Infrastructure State Revolving Loan Fund, oversight of the Small
Business Finance Center, and the issuance of tax-exempt and taxable revenue bonds.
2) Establishes the California Small Business Finance Center for the purpose of administering programs
to assist businesses seeking new capital resources, including, but not limited to, the Small Business
Loan Guarantee Program. The IBank is authorized to continue programs funded by the Small
Business Expansion Fund or establish one or more programs administered by the bank directly, in
conjunction with financial companies or financial institutions, in direct or indirect participation with
special purpose entities established for small business finance, or under contract with small business
financial development corporations.
3) Defines a “low-income community” as a census tract with median household incomes at or below 80
percent of the statewide median income or with median household incomes at or below the threshold
designated as low income by the Department of Housing and Community Development’s list of state
income limits, as specified.
FISCAL EFFECT: The chart below, documenting the $50 million approved by the Legislature for this
bill, is excerpted from SB 154 (Skinner), approved by both Houses of the Legislature on June 15, 2022.
Chart 1 – Approved Funding for SB 625
0509-102-0001—For local assistance, Governor’s Office of Business and Economic Development (Go-Biz) 50,000,000
Schedule:
0235028-California Infrastructure
(1) 50,000,000
and Economic Development Bank
Provisions:
The amount appropriated in Schedule (1) shall be available for grants to community development
1.
financial institutions pursuant to legislation enacted in the 2022–23 legislative session.
The budget passed by the Senate and Assembly includes an appropriation to the IBank of $50 million for
grants to community development financial institutions. This budget, however, represents a placeholder
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pending further negotiations between the Legislature and the Governor. The authors of this bill propose
that the program be administered by the California Pollution Control Financing Authority (CPCFA),
which is chaired by the State Treasurer, due to the Treasurer’s strong support of the proposed program
and her willingness to implement the program through CPCFA. The final amount, if any, appropriated for
this purpose and the state agency responsible for implementing the proposed grant program are subject to
change as budget decisions are finalized.
COMMENTS:
1) Federal CDFI Programs: The federal CDFI Fund was established in 1994 by the US Treasury to
administer programs that finance and advance economic and community development in low-income
and distressed communities across the country.
What is a CDFI?
In addition to providing programs, the federal CDFI All CDFIs have as a primary mission the serving low-
Fund certifies CDFIs. As of June 14, 2022, there income individuals and communities. How CDFIs
were 1,373 certified CDFIs in the US, with 108 accomplish their mission depends on the structure of
identified as California-based. As explained in the the organization, which includes all the following:
sidebar, CDFIs can take many forms, including: Banks—For-profit corporations providing capital
to rebuild economically distressed communities
Loan Fund (570) through targeted lending and investments
Credit Union (469)
Credit Unions—Member-owned non-profit
Bank or Thrift including (176) cooperatives promoting savings, affordable loans,
Depository Institution Holding Company (143) and other financial services
Venture Capital Fund (15) Loan Funds—Typically non-profit organizations
providing financing and technical assistance to
CDFI’s are annually certified by the US Treasury to small businesses, microenterprises, affordable
ensure the financial, administrative, and program housing developers, and community service
activity standards are maintained. Data from these organizations
reports is published, providing key insights into Venture Capital Funds—Organizations providing
community development activity across the US. In equity and debt-with-equity services to businesses
2020 (most recent report), 881 CDFIs reported with in distressed communities
52% of being loan funds, 25.4% credit unions,
In accordance with their mission, certified CDFIs also
12.4% banks/thrifts; 8.4% holding companies, and provide educational services like business planning,
1.1% venture capital funds. Key program findings credit counseling, and homebuyer classes to help their
include: borrowers use credit effectively
Loan funds constitute the largest share of Certified CDFIs.
Certified CDFIs are located in all 50 states as well as several US territories. California is among
the top four states for headquartered CDFIs.
Loans are the dominant Financial Product (in contrast to equity investments and loan guarantees)
offered by Certified CDFIs by dollar amount and count.
Consumer financing is the most reported type of financing provided in both count and dollar
amounts.
Financial education is the most popular Development Service used by clients of Certified CDFIs.
Certified CDFI credit unions report the highest total assets amount and the most financing capital
available.
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Serving low-income communities is central to the mission of CDFIs. This includes helping to build
community-based assets. During the most recent report period, 20% of Certified CDFIs were
Minority Depository Institutions, and 6.7% were across all institution types were Native CDFIs.
The CDFI Fund oversees nine primary programs, as well as special initiatives like the Opportunity
Zones. Below is a selection of these programs with descriptions provided by the CDFI Fund.
a) CDFI Bond Guarantee Program: The CDFI Bond Guarantee Program is a source of long-term,
patient capital for CDFIs.
b) CDFI Program: The CDFI Program provides Financial and Technical Assistance awards to
CDFIs.
c) CDFI Rapid Response Program: The CDFI Rapid Response Program is designed to quickly
deploy COVID-19 relief capital to Certified CDFIs.
d) Capacity Building Initiative: The Capacity Building Initiative is a source of training and
technical assistance for CDFIs.
e) Capital Magnet Fund: The Capital Magnet Fund encourages the development of affordable
housing in low-income communities.
f) Native Initiatives: The Native Initiatives provides awards, training, and technical assistance to
CDFIs serving Native Communities.
g) New Markets Tax Credit Program: The New Markets Tax Credit encourages economic and
community development in low-income communities.
h) Small Dollar Loan Program: The Small Dollar Loan Program was created to help Certified
CDFIs provide alternatives to high-cost small-dollar loans.
According to the sponsor, the California CDFI Coalition, one of the primary purposes of the CII
Program is to provide an ongoing source of funding to draw down federal funds, which require
nonfederal matching. Due to this matching requirement, California-based CDFIs have not received a
fair share of federal dollars.
2) Challenges to Accessing Capital: Access to debt and equity financing is critical for promoting the
efficient operation and expansion of small businesses. Small businesses rely on adequate short-term
debt (working capital) and long-term debt as well as equity financing to purchase new equipment,
replenish inventories, fund ongoing operations, and market their services long before those activities
generate revenue. While financial institutions routinely provide financing to established, larger
businesses, smaller businesses are often bypassed because they lack the collateral or establishment
history, or need too small of a loan.
The same dynamic occurs when small businesses attempt to access equity financing, with investment
funds often bypassing smaller businesses because they lack the operating history and revenue
generating track record of larger businesses. The situation often results in a “chicken or the egg”
scenario whereby businesses are told they need to grow in order to access financing, while
simultaneously being denied access to the financing they need to grow.
For business owners of color, women, and located in historically undercapitalized areas, including
rural, the challenges to accessing capital are even greater. In a May 2022 community development
research brief from the Federal Reserve Bank of San Francisco, one of several key findings found that
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respire state programs to lower lenders’ risk, lenders and investors continued to find raising capital for
small business lending difficult. Further, meeting the financial needs of small businesses often
required loan structures and conditions different than mainstream lending. However, holding a
portfolio of non-standardized loans also created long-term liquidity issues for the financial institution.
SB 625 supports the development of new capital resources for businesses in low-income
neighborhoods and by historically undercapitalized business owners. The CII Program provides
important new capacity-building funding for experience community developers to enhance existing
programs, serve more low-income communities, and address gaps in financing and technical
assistance.
3) California CDFI Small Business Lending: CDFIs play a unique and vital role in supporting low-
income and disadvantaged communities that exist throughout California. “In 2019, California CDFIs
originated more than 772,000 loans and invested more than $21 billion nationwide. These loans and
investments were used to help finance more than 51,300 affordable housing units and invest in more
than 19,000 small businesses.”
According to a letter submitted in support of the $50 million appropriation for CII Program by the
California Credit Union League, California Bankers Association, and the California Community
Banking Network:
“We believe that this investment by the state will continue to strengthen economic recovery efforts
and further encourage the important work of CDFIs. This one-time budget appropriation of $50
million will allow CDFIs to leverage additional private investment, quickly deploy resources, and
fill in the funding gaps in underserved communities in areas of housing, infrastructure, health care,
and small business development.”
Upon request, the California Credit Union League submitted an example to the Committee of how
CDFIs serve small business borrowers with inclusive financial products. Their example is from the
Orange County Credit Union, which is a CDFI credit union and a low income designated credit union.
The designation means that 50% or more of its members are low-income individuals.
The Orange County Credit Union uses CDFI grant funding to support credit union members by
executing a financial inclusion strategy. Examples of key actions include:
Inclusive product development, including the development of new checking products with low to
no fees
The use of loan loss reserves to expand lending and lowering lender risk - without charging high
fees and interest rates
4) The Challenge of Income Inequality during COVID-19: While California’s dominance in
innovation-based industries is unquestionable, the divide between the middle- and lower-income
households and the top-income earners is accelerating. Even when California’s unemployment rate
was at historic lows pre-pandemic, unemployment within certain geographic regions and population
groups remained significantly higher, as did the number of people in the state who were not
participating in the core economy.
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The coronavirus has deepened California’s income inequality, with the state’s most vulnerable being
at the greatest risk for poor health outcomes, having the least amount of savings to survive its
economic impacts, and being most likely to work in low-paid and least protected essential businesses.
A closer look at disaggregated employment data reveals a bifurcated economic recovery. In March
2020, California reported an unemployment rate of 5.1% as compared to the US rate of 4.5%. From
the employment side, this represents 18.1 million people in California, with 82.5% being employed in
full-time work (based on a 12-month moving average). During this same period, three of California’s
58 counties had unemployment, below 3.0%, with San Mateo County reporting the lowest at 2.5%
(based on not seasonally adjusted data). Colusa County (21.4%) was reported as having the highest
unemployment rate among counties in March 2020.
Two years later (March 2022), statewide unemployment is 4.9%, just slightly lower than 5.1%
reported in March 2020. As noted in the prior comment, employment by industry sector is up in every
sector, and three of the 11 sectors having recovered all jobs. However, the disparities have grown.
Chart 2 – Selected Data on Unemployment shows geographic and demographic unemployment-
related information for the year the World Health Organization announced that the COVID-19 was a
global pandemic and the following two years.
Chart 2 - Selected Data on Unemployment (March 2020, 2021, and 2022)
Unemployment Rate (Not Seasonally Adjusted)
Unemployment Rate (Not Seasonally Adjusted)
(12 month moving average)
March March March March March March
2020 2021 2022 2020 2021 2022
California California
5.1% 8.2% 4.2% 4.1% 11.1% 6.3%
(comparable rate) (comparable rate)
Colusa County 21.4% 15.4% 12.5% Blacks 5.2% 13.9% 10.5%
Imperial County 20.4% 15.7% 12.3% Hispanics 4.7% 12.5% 6.9%
Los Angeles County 5.6% 10.9% 4.9% Whites 4.0% 10.8% 5.9%
Orange County 4.19% 7.0% 3.1% 16 to 19 years old 15.1% 24.5% 13.6%
Riverside County 4.7% 7.7% 4.3% 20 to 24 years old 7.6% 17.5% 10.1%
Sacramento County 4.3% 7.4% 4.0% 25 to 34 years old 4.1% 11.7% 6.1%
San Bernardino County 4.4% 7.8% 4.3%
San Francisco City & *The Employment Development Department reports
3.5% 6% 2.5%
County a March 2021 (12-month moving average) Labor
San Mateo County 2.5% 5.0% 2.3% Participation Rate (LPR) of 61.8%. The LPR for
veterans is 43.2% vs nonveterans LPR of 64.6%.
Tulare County 13.2% 11.6% 8.4%
Source: www.edd.ca.gov
As illustrated in Chart 1, the disparities among population groups continued, and most cases increased
for certain areas of the state and individuals from certain demographics. For example, unemployment
among Blacks in March 2020 was at a historic low of 5.2%, which was still above the state average of
4.1%. One year into COVID-19 and the disparity between the rate of Black unemployment and the
statewide rate substantially increased (13.9% compared to 11.1%). Two years since the beginning of
the pandemic, the unemployment rate for Blacks is reported as 10.5% versus 6.3% for the workforce
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as a whole. From the beginning of the pandemic to March 2022, the disparity between the
unemployment rate for Blacks has grown from 1.1% in March 2020 to 2.8% in March 2021 to 4.2% in
March 2022.
Reports on May 2022 unemployment continued along similar trends with overall state unemployment
down 0.5% from March (4.6%) and 42,900 jobs being added. San Mateo had the lowest
unemployment rate of 1.7% and Imperial County the highest at 11.0%. For Blacks, however, the
unemployment was only down to 9.6% and 6.0% was reported for Hispanic workers. [The
comparable unemployment rate for demographic comparisons was 5.5%.] Again, the highest
unemployment was among 16-19 and 20-24 year olds.
The disparities shown in these charts are driven by and also influence a range of poor economic and
societal outcomes, including, but not limited to, limited educational attainment, economic insecurity,
poor health outcomes, negative engagements with law enforcement, and lack of a safety net for the
elderly and individuals with special needs. COVID-19 magnified these effects, further putting strains
on already struggling low-wage workers, particularly in the Black and Latinx communities.
The California Latino Economic Institute released a policy brief in December 2020, which provides
further data on the disparate and growing negative impact of COVID-19 on Latinos in California.
Among other findings, the briefing noted the following:
Latinos are overrepresented among California’s COVID-19 cases and deaths—59% of cases and
49% of the state’s deaths.
Latino overrepresentation in California’s cases has increased since April 2020.
Nearly 12% of California Latinos are currently uninsured—double the rate of other groups.
Latino unemployment rates are double those from the same time last year.
Nearly two-thirds of California Latinos report experiencing a loss of employment income since
March 2020.
Over 40% of Latinos currently report that it is somewhat or very difficult to pay their usual
household expenses in the last seven days.
Over three-quarters of California small business owners report that COVID-19 has had a moderate
to large effect on their businesses.
This and other reports have highlighted the many of the contributing factors to these health disparities,
including the impact of low household incomes and lack of employment security. During COVID,
Latinos and Blacks have comprised a significant component of the state’s essential workforce. While
a majority of White workers held jobs that allow them to work from home and decrease potential
COVID-19 exposure, Latinos and Blacks, more commonly held jobs in high-risk environments.
This increased exposure to COVID-19, combined with the socio-economic impacts on underlying
health, resulted in a statistically higher number of cases and deaths compared to the group’s percent of
the population. Chart 3 provides information from the California Department of Public Health
relating to COVID-19 cases in California by race and ethnicity. Data is current as of June 13, 2022.
Chart 3 - COVID-19 Case Loads and Outcomes by Race and Ethnicity
Race/Ethnicity Percent No. Deaths Percent Percent CA
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Cases Deaths population
Latino 46.4% 39,479 43.7% 38.9%
White 24.9% 31,392 34.7% 36.6%
Asian 9.6% 9,8173 10.9% 15.4%
African American 5.3% 6,308 7.0% 6.0%
Multi-Race 1.1% 1,436 1.6% 2.2%
American Indian or Alaska Native 0.4% 445 0.5% 0.5%
Native Hawaiian & other Pacific Islander 0.7% 581 0.6% 0.3%
Other 11.6% 972 1.1% ---
Total with data 100% 90,430 100% 100%
Source: California Department of Public Health, accessed June 9, 2022
The chart above, All Cases and Deaths Associated with COVID-19 by Race and Ethnicity, represents
data from 9,106,031 total cases, with 19% of those cases missing race/ethnicity. There are a total of
91,006 deaths, with approximately 1% of those deaths missing race/ethnicity.
5) Background on the IBank: The IBank was established in 1994 to finance public infrastructure and
private development that promotes a healthy climate for jobs, contributes to a strong economy, and
improves the quality of life in California communities. Housed within GO-Biz, it is governed by a
five-member board of directors comprised of the Director of GO-Biz (chair), the State Treasurer, the
Director of the Department of Finance, the Secretary of the Transportation Agency, and an appointee
of the Governor. The day-to-day operations of the IBank are directed by the Executive Director, who
is an appointee of the Governor and is subject to confirmation by the California State Senate.
The IBank is essentially self-funded, receiving minimal General Fund support. The IBank uses the
fees, interest income, and other revenues that derive from its public and private sector financing
activities, as the foundation of its operations budget. State contracts to small business financial
development corporations (FDCs) are supported through an annual General Fund appropriation of $1
to $2 million.
The IBank administers five core programs:
The Infrastructure State Revolving Fund (ISRF), which provides direct low-cost financing for
public infrastructure projects and economic development facilities.
The Bond Financing Program, which provides tax-exempt and taxable bond financing for
manufacturing companies, public benefit nonprofit organizations, public agencies, and other
eligible entities.
The California Small Business Finance Center, which assists small businesses access private
financing through loan guarantees, direct loans, and performance bond guarantees.
The California Lending for Energy and Environmental Needs Center or CLEEN Center, which
provides financing for environment-related projects to municipal governments, public universities,
schools, and hospitals (MUSH).
The Climate Catalyst Revolving Loan Fund, which is available to receive funds from non-state
governmental entities and private sources for the purpose of financing climate catalyst projects
that further the state’s climate goals. Operationally, the Strategic Growth Council sets the non-
financial program requirements, and the IBank serves as the bank. Categories of projects are set
by the Legislature in consultation with the Strategic Growth Council.
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Since its inception, the IBank has loaned, financed, or participated in over $40 billion in infrastructure
and economic expansion projects, including $434.8 million in industrial development bonds. This
includes over $822 million to local and state agencies, developing a high-level of expertise in
financing public infrastructure.
The IBank also serves as the state's only general-purpose financing authority with broad statutory
powers to issue revenue bonds, make loans, and provide guarantees. There is no pledge of IBank or
state general funds for any of the conduit revenue bonds. Over $8 billion in conduit revenue bonds
have been issued by the IBank, since 2015 including $2 billion in green and clean water projects.
The IBank estimated that, since its inception, it has supported the creation and retention of over
462,000 jobs. This includes over 23,000 from the ISRF program, 41,000 from bond financing
activities, and 398,000 through the Small Business Finance Center.
6) California Pollution Control Financing Authority : The CPCFA was established in 1975 for
the purpose of providing an alternative method of financing the acquiring, enlarging, and
installing of pollution control facilities. The authority is governed by a three-member board,
comprised of the Director of Finance, the State Controller, and the State Treasurer who serves
as the Chair.
Through the ensuing decades, the role and focus of the CPCFA have expanded to include
pollution-related financial activities, such as brownfield remediation, and non -pollution control
focused financing for small businesses, In the early stages of this mission expansion, CPCFA
used “excess fees” raised from bond issuances to seed smaller community development grants.
Today CPCFA utilizes many different sources of capital to administer a range of programs,
including bond programs to fund pollution control facilities and equipment, the California
Recycle Underutilized Sites (CALReUSE) Program, California Capital Access Program, and
the Sustainable Communities Grant and Loan Program.
According to the CPCFA website, "CPCFA partners with sister state agencies to achieve the
state’s environmental policy objectives by administering high-impact financing programs
designed to assist regulated entities and other stakeholders with accessing private capital. As a
government agency that issues tax-exempt private activity bonds, CPCFA can facilitate low-cost
financing to qualified waste and recycling projects, and other projects to control pollution and
improve water supply." As part of its bond-related activities, CPCFA is issuing Green
Bonds for pollution control and other environmental projects meeting commonly accepted
standards for climate investments.
Currently, the largest program administered by CPCFA is the California Capital Access
Program (CalCAP). CalCAP for Small Business program was established through legislation
enacted in 1994 for the purpose of incentivizing financial institutions to provide small
businesses with the capital to maintain and grow their businesses. The program includes two
credit enhancements to lower risk to small business lenders: a loss reserve and a collateral
support.
The loss reserve uses a portfolio-based credit enhancement model, whereby a loss reserve
account is established to offset losses incurred in connection with small business loans enrolled
in the program. Funding in the loss reserve account consists of moneys paid by the participating
borrower and financial institution, with CPCFA matching these contributions.
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Unlike a loan guarantee that ensures payment on a certain percentage of the defaulted loan [ 80%
in the guarantee program], under the loss reserve fund model, the default payment amount is
based on the amount of funds available in the reserve account. This means a lender could
potentially recover 100% of the value of the defaulted loan, if sufficient moneys are in the
account. The model encourages lenders to maintain good underwriting practices because
utilization of the loss reserve too often can quickly draw-down the reserve, leaving little for
other potential defaults of enrolled loans within the portfolio.
Loans enrolled through CalCAP can be used for working capital and to finance
land acquisition, construction or renovation of buildings, purchase of equipment, and other
capital projects.
As noted earlier, CalCAP was one of the CPCFA programs initially funded through excess fees
from the issuance of CPCFA pollution control tax-exempt bonds. The Legislature appropriated
$6 million in 2010 to expand the program, and in 2011 CalCAP received approximately one -half
of the state's $168 million SSBCI allocation based on a joint application to the US
Treasury. Later, California amended its SSBCI application to re-direct $65 million to a
collateral support program. In 2022, CPCFA is anticipated to receive over $590 million from
the federal State Small Business Credit Initiative (SSBCI).
In 2017, CPCFA established the Collateral Support Program using federal funding from the first
SSBCI funding round. The CalCAP Collateral Support Program helps small businesses obtain
private loans by making a cash deposit with a lender on behalf of a borrower. The lender holds
the funds as partial collateral against potential loss. The program is quite capital intensive on a
per-borrower basis, but funds not needed for defaults can be recycled for new borrowers every
couple of years. In addition, CPCFA recaptures a portion of the cash deposit annually as the
loan pays down. As of December 31, 2020, CPCFA had contributed a total of $87.9 million in
cash deposits for 329 loans, utilizing moneys that were recaptured and recycled.
CPCFA also contracts with several state agencies, including the California Air Resources Board
and the California Energy Commission, to provide lenders with loan loss reserve accounts to
finance new, cleaner-burning, heavy-duty, diesel trucks and buses and the acquisition of electric
vehicle charging station equipment. According to the 2020 Annual Report, through the end of
December 2020, the total number of loans enrolled in each CalCAP program is as follows:
CalCAP for Small Business since 1994 is 23,209.
CalCAP/CARB since 2009 is 29,883.
Collateral Support Program (CalCAP/CSP or CSP) since 2013 is 329.
CalCAP Electric Vehicle Charging Station (EVCS) Financing Program (CalCAP/EVCS)
since 2015 is three.
California Seismic Safety Capital Access Loan Program (CalCAP/Seismic Safety) since
2016 is three.
CalCAP American with Disabilities Act Program has not enrolled any loans to date.
7) Transparency is Fundamental to Redressing Historic Underinvestment: Proposed amendments
call for the renaming of CPCFA as the “California Community Development Financing Authority”
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and the public may wonder why a name could be so important. Simply put, it comes down intention
and representation.
When CPCFA was established, inclusive economic development was not its mission. It was intended
to provide a cost effective financing alternative for pollution control facilities. In 2022, things have
evolved and CPCFA is now on the verge of receiving nearly a billion dollars in new financing
dedicated to addressing historic underinvestment in low-income communities and diverse business-
owners.
As noted in the analysis, CPCFA is scheduled to receive $590 million in federal funds to provide
credit enhancements for small business borrowers. In deploying this capital, business owners from
socially and economically disadvantaged groups and underserved communities will be prioritized. SB
777 is proposing that CPCFA take on a new role of allocating $300 million in tax credits to raise
private capital that will be invested in undercapitalized low-income communities. And, SB 625
(Caballero and Lemón) is proposing that CPCFA allocate $50 million in General Fund money as
grants to community development financial institutions (CDFI). These grants will serve an essential
role in increasing the capacity of CDFIs to address key issues in lower income communities, including
entrepreneurship and the development of affordable housing and health facilities. Each of these
expanded and new programs will require additional staffing and new stakeholder partnerships to be
formed.
The impact of the COVID-19 pandemic intensified and accelerated income disparities in California,
making community development financing too important of a mission to be a sideline. People know
things by their name and the renaming of the authority sets the clear intention that going forward
CPCFA will be a fully committed partner in the entire enterprise of community development. The
mantel of inclusive community development needs to placed front and center where programs and
funding can be easily identified.
With the expansion of scale and variety of CPCFA’s programs, it is imperative to look at the totality
of CPCFA’s responsibilities and rename the financing authority to better reflect the full scope of its
resources. These significant new tools require the authority to make itself known as a primary driver
of community development.
8) Proposed Amendments: Below is a list of amendments the committee members may wish to review
when considering the bill.
a) Transfer the administration of the program from the IBank to CPCFA. Include related
amendments to recast the provisions within a different set of Government Code sections.
b) Change the name of the CPCFA to the California Community Development Financing Authority,
effective January 1, 2024. Authorize the authority to continue to use the name California
Pollution Control Financing Authority for the issuance of bonds, federal reporting, and the
continuance of any contracts in force or under development on January 1, 2024.
c) Authorize rather than require the establishment of the CII Program. Include related amendments
that condition the establishment of the program on the receipt of sufficient money that has been
appropriated by the Legislature.
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d) Specify that the purpose of the CII Program is to enhance the capacity of CDFIs to provide
technical assistance and capital access to economically disadvantaged communities in this state.
e) Add a definition of “administration expenses” and authorize the Authority to access moneys in the
California Investment and Innovation Fund for administrative expenses.
f) Expand the definition of an “eligible applicant” to include:
i. Have a current certification from the US Treasury.
ii. Have a minimum net worth of $25,000 as indicated on its financial statements prepared in
accordance with generally accepted accounting principles.
iii. Have made a minimum of five loans in the twelve months prior to submitting its
application.
g) Modify the definition of an eligible applicant as follows:
i. The definition of a California-based CDFI is modified from being headquartered in the
state to having a principle office in CA and the officers of the principle office are
domiciled in CA.
ii. The definition of an out-of-state CDFI is modified by increasing the minimum investment
in CA from $5 million to $10 million within the prior three years.
iii. Remove the authority for small and emerging out-of-state CDFI to participate in the CII
Program.
h) Modify the definitions of “low-income household” and “lower income household” by requiring
the comparable median income household to be either the county median income or the state
median income, whichever is less.
i) Establish an award process for all eligible applicants to receive grants, as specified.
j) Define eligible uses of the capacity grants, allow grantees up to two years to use the funds, require
any interest earned on the grants to be reinvested by the grantee into eligible activities.
k) Reduce the maximum amount of funds that may be allocated per year from $25 million to $15
million.
l) Modify and expand the reporting requirements for the grantees and authority to conform to the
purpose of the grant.
m) Make other technical and conforming changes.
9) Related Legislation: Below is a list of bills from the current session.
a) AB 1572 (JEDE) State New Market Tax Credit: This bill establishes the C-NMTC Program and
authorizes the awarding of $100 million in tax credits annually for five years, beginning in the
2023 tax year. The purpose of the C-NMTC Program is to attract new private capital to very low-
income neighborhoods in California. In general, the new state credit parallels the F-NMTC
Program. Status: Held on Suspense in the Assembly Committee on Appropriations, 2022.
b) SB 625 (Caballero and Limon) California Investment and Innovation Program: This bill
establishes the California Investment and Innovation Program (CII Program) for the purpose of
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making grants to CDFIs. Status: Pending in the Assembly Committee on Jobs, Economic
Development, and the Economy.
c) SB 777 (Bradford) Jump Start Program: This bill establishes the California Jumpstart Act,
which directs the California Pollution Control Financing Authority to allocate up to $300 million
in credits (similar to a C-NMTC) against the gross premiums tax to investors in relief funds.
Status: Pending in the Assembly Committee on Jobs, Economic Development, and the Economy.
REGISTERED SUPPORT / OPPOSITION:
Support
California Coalition for Community Investment (sponsor)
Access Plus Capital
Accessity
Accion Opportunity Fund
California Bankers Association
California Coalition for Rural Housing
California Credit Union League
California Farmlink
California State Council of Laborers
California State Treasurer
Cameo - California Association for Micro Enterprise Opportunity
CDC Small Business Finance
Clearinghouse Cdfi
Corporation for Supportive Housing (CSH)
Habitat for Humanity California
Housing Trust Fund Ventura County
Housing Trust Silicon Valley
Lendistry
Neighborworks Capital
Pacific Coast Regional Small Business Development Corporation
Primary Care Development Corp.
Rural Community Assistance Corporation
Sacramento Housing Alliance
San Francisco Bay Area Planning and Urban Research Association (SPUR)
Self-help Federal Credit Union
Small Business Majority
Southern California Association of Non-profit Housing (SCANPH)
The San Francisco Housing Accelerator Fund
Worker-owned Recovery California (WORC)
Working Solutions
Opposition
None on file
Analysis Prepared by: Toni Symonds / J., E.D., & E. / (916) 319-2090
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